Big trouble

The importance of China in the global economy is obvious, as is the need for that country to play its part in the battle to contain international recession, a theme which Wen Jiabao, the Chinese premier, has stressed during the European tour which recently brought him to London. But if the recession has shown how dangerously opaque economic processes in western countries can be, it has also been a reminder that less is known about such processes in other states - of which none is more critical than China - than is often assumed.

The very nature of the Chinese economy is itself disputed. On the one hand, there is the familiar story of a centrally directed privatisation which has been the basis of great success at home and abroad. But there is also the view that the real engine of China's economic ascent began to throb in the 1980s when small-scale enterprise in the countryside took off, and that this renaissance was later blunted by central-government policies that favoured large urban enterprises, whether public or private. Then there is the argument that China, like Japan, has two economies, one efficient and export-oriented, the other domestic and old-fashioned.

The debate over the characteristics of Chinese capitalism matters because it will help determine policy at a time when everybody knows that things cannot go on as before, either in China itself or in the global economy. At its broadest, the difference is between those who believe the main obstacle to policy change in China comes from below - from districts, regions and enterprises resisting central policy - and those who believe it is located at the top, in an overly anxious national government meddling too much and too often in the country's economic life.

Certainly the Chinese government often seems almost too aware that its legitimacy depends on economic performance. Officials must have winced this week as they approved the publication of figures showing that 20 million of the country's 130 million migrant workers are unemployed or laid off, as firm after firm has closed its doors or reduced staff in recent months. The government has ceased to publish the figures of so-called "mass incidents", among them the protests, sometimes violent, which often follow closures and redundancies. The de-collectivisation of the countryside and the dismantling of welfare provision in city factories has removed the safety net which most Chinese once enjoyed. That was tolerable when the economy was spiralling upward, but could become intolerable as it slows. China needs an economic new start as much as, or more than, the United States and Europe do.